Tax and Revenue Administration Alberta Corporate Tax Act Information Circular CT-13R1

CT-13R1 / November 2005

ALBERTA CORPORATE TAX ACT INFORMATION CIRCULAR:
RECORDS AND BOOKS

This Information Circular explains requirements for maintenance and retention of the records and books pursuant to the Alberta Corporate Tax Act (the "Act"). For simplicity, only the term "records" will be used in this circular unless reference is made to specific books of account. The topics discussed include:

• Maintenance of Records
• Location of Records
• Retention Period for Records
• Early Destruction of Records
• Computer-Stored Records and Microfilmed Records
• Electronic Images of Records
• Decision Tree - Destruction of Records for Corporations (PDF file)
  

MAINTENANCE OF RECORDS

1. The requirement to maintain records applies to all entities subject to the provisions of the Act. Following is a list of the types of entities, each of which is referred to as "taxpayer" in this circular:

   a) corporations with a permanent establishment in Alberta, whether or not they are required to file an Alberta income tax return;

   b) insurance corporations, as defined in Part 9 of the Act;

   c) banks, loan and trust corporations and credit unions as defined in Part 10 of the Act; and

   d) individuals, trusts and estates that claim the Alberta Royalty Credit for Individuals and Trusts ("RCIT") pursuant to Part 11 of the Act.

   Requirements to maintain records are also found in other legislation, such as the federal Income Tax Act (the "federal Act").

2. Section 61 of the Act requires the maintenance of records in a form and with information that will enable Alberta taxes and tax credits to be determined.
   
   
3. If Tax and Revenue Administration ("TRA") finds that records are inadequate, the taxpayer will be asked to sign a written undertaking to maintain adequate records. Prior to signing the undertaking, the taxpayer may wish to consult with a lawyer or an accountant on the consequences of signing the particular undertaking. Within a reasonable period of time, TRA may review the records to ensure compliance. If there has not been full compliance within the time period allowed, the taxpayer may be subject to penalties and/or prosecution.

LOCATION OF RECORDS

4. The Act requires taxpayers to keep their records and books of account in Alberta. By policy, TRA permits a taxpayer to maintain records and books elsewhere in Canada. Taxpayers must obtain written permission from TRA to maintain records and books outside of Canada.
   
   
5. If a taxpayer has received permission to keep its records outside of Canada, it must, upon TRA's request and at its own cost, forward the records and supporting documentation to TRA or a business location in Canada, or arrange to have TRA audit staff visit at the location of the records. The taxpayer will be responsible for absorbing the incremental costs incurred by TRA in sending auditors outside Canada.

RETENTION PERIOD FOR RECORDS

6. The provisions under the Act concerning the retention period for records parallel provisions under the federal Act. The retention period of records is dependent upon whether the records are of a permanent or non-permanent nature.

   Permanent Records
   
   Some examples include:

   For corporations only:

   • minutes of the corporation's directors meetings;
   • minutes of the corporation's shareholders meetings; and
   • the share register or any other record of the corporation containing details of the ownership and any transfers of the shares of the capital stock of the corporation.

   For corporations, individuals, trusts and estates:

   • the general ledger or other books of final entry containing the summaries of the year-to-year transactions; and
   • any special contracts or agreements necessary to support the entries in the general ledger or other books of final entry.

   Non-Permanent Records
   
   Some examples include:

   • all other books of entry such as sales, payroll, or cash receipts journals, cheque register, etc.; and
   • all supporting documentation such as cancelled cheques and bank statements, purchase and sales invoices, joint venture billings, etc.
     
     
7. A corporation must retain its permanent records for two years after dissolution. Non-permanent records must ordinarily be retained for a minimum of six years from the end of the last taxation year to which they relate; however, once a corporation is dissolved, non-permanent records must only be retained for two years after the date of dissolution.
   
   
8. The permanent records of individuals, trusts and estates must be retained for six years beyond the last day of the taxation year in which the business ceased. Non-permanent records must ordinarily be retained for a minimum of six years from the end of the last taxation year to which they relate.
   
   
9. The retention rule for non-permanent records is modified under the following circumstances:

   a) if a taxpayer fails to file a required Alberta corporate income tax return on time, the records for that year must be retained for six years from the date the return is filed;

   b) a taxpayer that has, or has had, a matter under objection or appeal must retain all records necessary for dealing with the matter until the objection or appeal is disposed of or the time provided for appeal, or further appeal, has expired; and

   c) the Minister of Finance, by demand served personally or by registered letter or certified mail, may require that a taxpayer retain records for a further stipulated period of time. For example, if a taxation year is under review by TRA and, due to complexities, the review will extend beyond the six-year retention period, TRA may require the records relating to the issues under review be retained until the issues are resolved.

EARLY DESTRUCTION OF RECORDS

10. A taxpayer may request permission to destroy its records before the statutory retention period expires. If these records are subject to the retention provisions of the federal Act, the taxpayer must first obtain written permission from the Canada Revenue Agency ("CRA") for their early destruction. Once permission for early destruction has been granted by CRA, the taxpayer must then obtain the agreement of the Minister of Finance if the records relate to a taxation year during which the taxpayer was subject to the Act. A written request should be made to TRA, accompanied by a copy of the written consent obtained from CRA. The request must be signed by an authorized representative of the corporation and must provide an itemized description of the documentation which the taxpayer seeks permission to destroy, the taxation years to which the documentation relates and the reasons for the request.
    
    
11. Prior to requesting permission to destroy records early, RCIT claimants should ensure that any RCIT claims to which they may be entitled have been filed. If permission is granted to destroy records early and the taxpayer later requests an RCIT claim or an amendment to a claim, the request cannot be processed unless the taxpayer can supply supporting documentation.
    
    
12. Before permission for early destruction will be granted, all returns for the corresponding taxation years must have been filed with the exception of any years in which the corporation was exempt from filing. See Information Circular CT-2, "Filing Requirements" for details on exemptions from filing.
    
    
13. Permission for the early destruction of records will not be granted unless the maximum period allowed for filing of Notices of Objection or Appeal has expired and no Notices of Objection or Appeal are outstanding in respect of those taxation years.
    
    
14. When records have been retained for the required statutory periods, permission from TRA to destroy the records is not required (unless one or more of the conditions discussed in paragraph 9 exists). However, permission may be required from other authorities such as federal departments, other provincial departments or municipal governments for their purposes.
    
    
15. A taxpayer who fails to comply with the retention requirements described above may be liable to a fine on summary conviction.
    
    
16. One decision tree relating to when permission for the early destruction of records is required or possible follows this narrative. Taxpayers subject to the Insurance Corporation Tax and the Financial Institutions Capital Tax can use the corporation decision tree by starting at the non-permanent/permanent boxes.
    
    Decision Tree - Destruction of Records for Corporations (a PDF file)

COMPUTER-STORED RECORDS AND MICROFILMED RECORDS

17. The policy of TRA regarding computer-stored records and microfilmed records parallels that of CRA as described in its Information Circulars. Such storage methods are acceptable providing the records are readily accessible and can be reproduced in clear, readable copy.

ELECTRONIC IMAGES OF RECORDS

18. TRA's policy regarding electronic images of books of original entry and source documents parallels that of CRA as described in its Information Circulars. The images must be produced, controlled and maintained according to the national standard of Canada as outlined in the publication entitled Microfilm and Electronic Images as Documentary Evidence (CAN/CGSB-72.11-93). This publication is available by contacting:

    CANADIAN GENERAL STANDARDS BOARD
    SALES CENTRE
    GATINEAU, QC K1A 1G6
    
    Phone:  1-800-665-2472
    Fax:  (819) 956-5644